Economy, Business And Markets

Deals With Foreign Banks Worth $35b

Deals With Foreign Banks Worth $35b Deals With Foreign Banks Worth $35b

Following the lifting of the sanctions in January, Iran has reached agreements with foreign banks worth $35 billion, according to deputy minister of economy, Mohammad Khazaei.

Khazaei added, however, that it would take time to see the final positive results of the sanctions’ removal.

"Iran has started some joint projects with foreigners in the post sanctions era totaling $3.5 billion. Guarantees and licenses have been issued for a couple of the projects and they are being financed,” he was quoted as saying by IRNA on Sunday.

The official elaborated that Japan has agreed to open a $10 billion credit line for Iran. JICA, Japan’s International Cooperation Agency has agreed of offer $2 billion in cheap loans for Iranian projects.”

Japan and Iran signed a bilateral investment treaty, which is designed to protect investments by Japanese companies across various sectors of the economy, in February, when the two countries also signed Tehran’s debt guarantee of up to $10 billion of investments by Japanese companies. 

“Agreements over $8 billion credit line by the Export-Import Bank of Korea, $5 billion [coverage] by South Korea’s export credit agency, K-Sure, as well as another credit line  with Norway are some our achievements during the post-sanctions era,” he added.  

Earlier in May, the Korea Eximbank signed a financial package worth $ 15 billion with the Iran’s central bank and government, paving the way for local companies to reenter the Iran market.

So far, primary negotiations have been reached, according to the official. “Further talks will focus on the loans’ value, grace period, agent banks and planned projects.”

According to Khazaee, loans from foreign sources would be allocated only to projects that will not add to government debt and help generate new jobs,” he said. “Some sectors, namely agriculture, are a priority.”

At least 15% of each project must be financed from domestic resources to be eligible for external funding, he said.

Debts to Credit Agencies

Iran owes $2.7 billion to export credit agencies including Italy’s SACE, France’s Coface, Germany’s Hermes and Austria’s OeKB, according to the official. However, he said most of the debts have been cleared since the lifting of the sanctions.

The country defaulted on some of its debts to foreign export credit agencies after the punitive sanctions cut off Iran from the global banking network.

“Debts include the principal loan, interest and fines for late payments,” he said. “However, the Central Bank of Iran has refused to pay fines for late payments, since it was not our fault.”

“Only Hermes Cover debt has not been settled yet, which if cleared could help Iran attract more resources from European banks.”

Iran owes Germany about €500 million ($569 million) under the so-called Hermes cover, a German government arrangement that protects German companies if foreign debtors fail to pay.

Berlin has demanded that Iran clear its €500 million ($560 million) debt before it resumes providing guarantees for German exports to the Islamic Republic. In early May, Khazai said during a meeting of the Iran-Germany Joint Commercial Commission in Tehran that the two countries had reached agreement to resolve the debt.  

Islamic Development Bank

Khazaei denied rumors about Iran's membership has been suspended from the Jeddah-based Islamic Development Bank. “Last month a delegation of IDB officials visited Tehran and held meetings with various organizations discussing plans for future cooperation.”

Iran has get approval for a $2.4 billion finance from the IDB, mainly for developing agricultural projects, water supply networks and dam construction.

“So far, Iran has received $896 million of the approved funding,” he added.